Legislator to push pension reforms

State board weighs lobbyist guidelines

A leading Democratic state senator pledged Tuesday to push a reform package this fall to eliminate the type of pension deals that netted $4.5 million for a major Republican lobbyist.

The windfall for Robert Kjellander, the treasurer of the Republican National Committee, is at the center of a growing reform effort following the Tribune's disclosure of his lucrative deal with The Carlyle Group, a Washington, D.C., investment firm.

The pledge from state Sen. Jeff Schoenberg (D-Evanston) came as a second state pension board acknowledged it is considering changes in how it handles lobbyists who represent firms seeking investments from retirement funds.

Kjellander's $4.5 million from Carlyle arose from six deals with the state Teachers' Retirement System, which since 2002 has agreed to invest $500 million with the firm. Kjellander and Carlyle have not been accused of any wrongdoing.

Schoenberg, co-chairman of a bipartisan commission that monitors the state's fiscal matters, said middlemen who steer businesses to state pension systems add little value to the process and should be prohibited.

"My key goal all along has been to eliminate the middlemen who take in these tremendous fees yet provide very little value added to the transaction," Schoenberg said.

Gov. Rod Blagojevich has said he would push for reforms following the disclosure of Kjellander's fees and the indictment of a former teacher fund trustee, Stuart Levine, a major Republican fundraiser, and Joe Cari, a Chicago attorney.

Cari, former finance chairman for the Democratic National Committee, was accused of helping Levine extort money from firms in return for Levine's help in getting Cari business with other public pension systems.

Levine has pleaded not guilty, but prosecutors have said Cari plans to plead guilty to corruption charges along with Steve Loren, a private attorney who advised the fund.

Jon Bauman, executive director of the Teachers' Retirement System, told Schoenberg and other legislators on the Commission on Government Forecasting and Accountability that the system uses a "strenuous due diligence process" but "what you can't do is control human conduct."

"I hope I get to see the day when these people are breaking rocks in the hot sun, and I'm there to watch," Bauman said Tuesday.

Teachers fund trustees moved earlier this month to bar third-party fees for lobbyists and lawyers who are not doing comprehensive financial or marketing work for firms.

The teachers fund provides pension and disability benefits for teachers and administrators in Illinois public schools except for Chicago. The state also oversees pension funds for state university workers as well as judges, lawmakers and rank-and-file state employees.

On Tuesday, Bill Atwood, executive director of the Illinois State Board of Investments, said the panel that manages the money for judges, lawmakers and rank-and-file state workers is undergoing a review of third-party marketers to make the process more transparent.

Key components of the proposal include making sure financial arrangements with a third-party marketer are made public and that all communication between board members and investment firms is fully disclosed.

Atwood said lawmakers should not go too far with new restrictions. "First off, I can be highly sympathetic how a policymaker would have great concerns about the moneys that are paid to placement agents," Atwood said. "The only concern that I would have is that, while the third-party structure can be abused and has been abused, at the same time, third-party marketers can perform legitimate services to money managers and to the consumers of their service--[retirement] plan sponsors like us.

"It will be just unfortunate," Atwood said, "if the good goes away with the bad."